t81_32_introduction+to+professional+indemnity+insurance.unlocked

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UIB Introduction to Professional Indemnity Insurance


INTRODUCTION TO PROFESSIONAL INDEMNITY


Introduction to Professional Indemnity

Professional Indemnity Insurance indemnifies the Insured for sums which they may be legally liable to pay arising from claims made by a third party.

These claims must be for a breach of duty in their professional services by negligent act, mistake, error or omission committed during the policy period.

Professional Activities are usually skilled areas of expertise the Insured is qualified to do and specialises in and receives fees for undertaking


Introduction to Professional Indemnity

Professions who normally buy Profession Indemnity Insurance Accountants Architects Engineers Banks and Financial Institutions Doctors Insurance Brokers Quantity Surveyors

Claims can arise from: Breach of Professional Duty Breach of Copyright Breach of Confidentiality Medical Malpractice Libel and Slander Loss of Documents


HOW LIABILITY ARISES


How Liability Arises

Breach of Contract

Negligence

Breach of Duty

Defamation

Breach of Intellectual Property Rights


Breach of ContractProfessionals can be sued for breaching:

an implied term in the contract an express term in the contract

Implied terms exist whether or not they have been expressly agreed. It is an implied condition of professional services contracts that the professional should act with reasonable skill and care. Claims for beach of implied term essentially allege negligence.

Some professionals whose service provides a product (e.g. in the construction or Information technology fields) are occasionally under a more onerous implied term that what they provide is fit for its purpose .

There may also be express conditions in a written contract, which seek to broaden the professionals duty further and these will be the subject of commercial negotiation between the professional and their customer. If the professional breaches these terms they may also be sued e.g. for breach of warranty.


Breach of Contract

Breach Of Contract Breach Of Implied Term

Breach Of Express Term

Definition Contractual term which is implied by relationship whether or not parties have expressly agreed it

Contractual term expressly agreed by parties

Example Professional uses reasonable skill and careWhat professional designs and supplies must be fit for purpose

Professional guarantees performance of work.Professional agrees to deliver work by certain date.


Breach of Contract vs. Negligence

Negligence

Breach of Contractor Negligence


Negligence

Professionals will also owe a duty of care to third parties other than their customers. They are not expected to be perfect lawyers lose cases, surgeons do not save every life.

As with all negligence cases the claimant will have to prove:

the professional owed them a duty of care the professional breached a duty of care the breach of duty caused the claimants loss

Foreseeability is often identified as a fourth requirement (i.e. that the profession should have been able to foresee that their breach would cause damage to the claimant), although this is tied closely to the duty of care.


Duty of care owed

Breach of duty

Foreseeablethat breachwould causedamage

Breach of duty causeddamage

Negligence 4 Steps


Breach of DutyIt is not enough to simply prove duty of care the claimant must also prove breach of duty i.e. the professionals work fell below an acceptable standard.

The courts accept that lawyers lose cases and doctors lose patients but will seek to establish whether the professional has fallen below the standard expected of them.

Professionals thus owe a duty of care which is considerably higher than a reasonable man but are not expected to be the best in the business. It is also an objective standard of care i.e. a junior professional owes the same level of duty as a more senior professional in that firm.

The courts can expect a higher standard of care in some professions than others e.g. the standard of care expected of a solicitor is typically very high as they are expected to know the law or refer the case to a specialist where they do not.

When such cases come to court, typically the defendant and the claimant will use expert witnesses from the profession to opine on what would be considered reasonable or average practice in that profession to establish whether the professional had fallen below that benchmark.


DefamationBroadly one can say that slander is a defamatory remark made orally i.e. spoken whilst libel is a defamatory remark in writing.

All professionals could potentially defame their competitors or potentially their customers in their brochures or on their web site.

Professionals can also be sued for breaches of intellectual property Types of breaches include: Patent the professional breaches anothers registered right to an invention Breach of copyright/music rights/broadcasting rights the professional

breaches the legal right to publish some work Passing off the professional has imitated their trade name and logo and

passed it off as their own Trademark the professional has copied their trademark Plagiarism the professional has appropriated their ideas and passed them off

as their own

Breach of Intellectual Property


Professional Indemnity vs. Public Liability

Injury/Damage

Financial Loss(No Injury/Damage)

Advice

Not Advice

PI PI

No CoverPL


COLLATERAL WARRANTIES


Collateral Warranty

Occupier Developer Architect

Collateral Warranty - a contract collateral to (or alongside) another contractwhich creates a contractual relationship, where otherwise none would exist

Collateral Warranty


Collateral Warranty

A Collateral Warranty provides reassurance to the occupier (in the example above) that should the Developer cease trading they have rights of recourse against the original Architect.

It provides a contractual relationship between the Occupier and the Architect which would not normally be given should the Collateral Warranty not be in place.

Insurers are concerned about collateral warranties as their mere existence potentially creates additional duties of care for the professional. As they can also be assigned to other parties (e.g. from tenant to sub-tenant) the professional can end up owing duties of care to parties quite remote from the original work.


RETROACTIVE COVER AND CLAIMS MADE


Retroactive Date

Policies will also often contain a retroactive date as insurers often do not want to cover claims arising from historical activities of which they are not aware. Claims made during the policy period, but arising from acts prior to the retroactive date are not covered.

When an insured changes insurer they need to be careful to ensure that the retroactive date does not change to ensure full continuity of coverage. If there is no retroactive date then all claims made in the policy period will be covered regardless of when the act which gave rise to them was committed.

Professional Indemnity Insurance only covers claims made during the policy period of claims made after the policy period which arose from circumstances advised during the policy period.


Retroactive Date

Ideally the retroactive date needs to go back to the first date Professional Services were

provided.

Claims in Scenario 1 and 2 below are covered,

Claims in Scenario 3 would not covered.


POLICY STRUCTURE


Policy Structure

Professional Indemnity policies have a number of different structures:

Most will have an each and every claim limit i.e. the maximum amount that can be paid out for each individual claim.

And an aggregate limit i.e. the most that can be paid out per policy period.

An excess is also applicable to every claim including or excluding defense costs and expenses

Policies can be structured including or excluding defense costs and expenses in the total aggregate limit

Policies excluding defence costs are normally for smaller organisations and are generally much more expensive


Policy Structure

Damages

+

ClaimantsCosts

+

DefenseCosts

AED 5M

CostsInclusive

Damages

+

ClaimantsCosts

AED 5M

CostsIn Addition

Defense

Costs

No Limit


Common Policy Extensions

Cover additional liabilities Breach of Copyright

Cover other costs incurred Court Attendance Costs

Cover first party costs Loss of Documents Fidelity

Cover costs of avoiding claim Rectification costs, Fee recovery Mitigation Costs


Common Professional Indemnity Exclusions

Bodily Injury/Property Damage not arising from breach of professional duty

Dishonesty

Insolvency/Bankruptcy

Acts as directors or officers

Fines & penalties, punitive damages

Contractual Liability restrictions

Breach of copyright

Terrorism/Asbestos/Toxic Mould/Pollution


SINGLE PROJECT AND ANNUAL RENEWABLE POLICIES


Single Project and Annual Policies Professional Indemnity Policies can be bought for specific single projects or to cover all the activities of an Insured.

Single Project policies are for a set period of work, plus a maintenance period and then an extended reporting period, with the premium paid in one installment at the start of the policy (Sometimes this is adjustable on completion of the building works)

Annual policies are annually renewable and based on the last complete financial years fees. This covers all work undertaken subject to policy terms and conditions.

Due to the nature of Professional Indemnity Policies being claims made and having a retroactive date, if an annual policy is purchased it must be renewed each year in order to retain coverage for past liabilities.


Single Project non-binding Very Rough Indication (VRI) Form

Should Amana require a quotation for a Single Project policy UIB have provided this form to provide the essential information for a quick turnaround


Underwriting Considerations

Type of Profession Fees split by type of work Size of their clients Size of the Insured's contracts Experience of the principals Ratio of qualified to unqualified staff Amount of sub-contracted work Location of the Insured Claims experience Limit and excess options requested Risk management (including contractual controls)


CLAIMS AND RISK MANAGEMENT


Common Causes of Claims

Absent or incomplete documented office procedures Absence of terms of engagement/contract details Non-compliance to check and sign off procedures Professional staff operating outside authority levels Professionals operating on their own Incomplete case and claim file records Absence of standard report clauses/disclaimers Absence of recruitment guidelines and failure to take up employer references Records not retained for the minimum length of time.


Risk Management ControlsA great many misunderstandings (which later become formal claims) can be avoided if written documentation is created and retained. This is especially important when the verbal instructions involve:

Changes in the initially agreed-upon scope of services, Changes in the original fees for those services, Instructions from clients, which give The Amana Group the authority to

pursue a specific course of action on your clients behalf.

The Amana Group should document all file activity - thorough, accurate file documentation and adequate document retention practices will often provide a professional firm with its strongest single piece of evidence that services were properly performed. Although additional time is required to maintain detailed records of actions, procedures, and decisions, such information is essential in defending all types of claims. Documentation is so important that, in some firms, the extent to which professional employees record their activities in client, case, or project files is considered in periodic performance reviews.


Risk Management ControlsDocuments to be retained by The Amana GroupWhen engaging subcontractors The Amana Group should always maintain up to date records of their subcontractors including:

Any trade licences they hold which are applicable to the work they are undertaking

Other information which may be useful:

Copies of their Insurance Certificates including but not limited to Professional Indemnity, Third Party Liability and Workmans Compensation.

Details of experience of principles, their qualifications and details of past projects


AMANAs PROFESSIONAL INDEMNITY POLICY


The Amana Group have an International Program:

USD 10,000,000 any one claim limited to USD 20,000,000 annual aggregate across all territories

USD 300,000 excess in respect of each claim including defense costs and mitigation losses

Mitigation costs limited to USD 1,000,000 each and every claim this forms part of the overall USD 10,000,000 any one claim limit and is subject to the USD 300,000 excess

Amana Policy Specifics

USD 300,000 Excess

USD 20,000,000 in the annual aggregate

USD 10,000,000 any one claim


Amana Policy SpecificsNew Extensions include the following:

Joint Venture ClauseProvides cover for work undertaken in a JV providing Amana has management control

Self Employed PersonCover for contracted hire staff/self employed working for Amana Group

Libel and SlanderCommitted in good faith by and employee

Loss of DocumentsCosts for replacement and restoring lost of damaged documents

Innocent Non DisclosureProviding notification/disclosure requirements are followed the Reinsurer will not havegrounds to reject a claim for Innocent Non Disclosure

Loss of Use / Consequential LossThis provides Amana Group with far wider cover as you are now insured for 3rd party claims for loss of use / consequential financial loss as a result of your negligence in design


Claims IntroductionWhat to notify?Any verbal or written demand for a claim from a client for damagesA claim from The Amana Group for mitigation costs in order to prevent a circumstance that may later lead to a claim

When to notify?As soon as possible and without delay. All claims must be notified within 30 days of Amana becoming aware of the initial circumstance which may give rise to a claim under this policy.

Who to notify?The Finance Department of Amana Group Corporate Office, who intern will notify Insurers within 30 days of discovery of the circumstance

How to notify?Initial verbal notice, followed by written notice with essential points: these are best covered by completing the Preliminary Loss Reporting Form


Preliminary Loss Reporting FormDate of notification to Amana:

Project Name:

Outline of the project where the claim has arisen. Including total contract value and portion of which Amana are responsible for:

Brief description of the claim:

Estimated quantum of the loss:

Attachments :

Description of the Contracts Notification received from claimant Design documentation Other useful supporting information Details of subcontractors and their Insurances

Amana Contact person for additional information

Name:.Title:. Email: .Tel: .

Name of person that reported loss:

Date of Reporting:

Signature:


What not to do in a ClaimParticularly related to Professional Indemnity Claims but applying to all insurance cover generally: YOU SHOULD NOT admit any liability or assume any obligation and make any statement which would suggest that Amana or any of its staff is at fault.

YOU SHOULD NOT discuss the claim with the Claimant without Insurers prior approval of the communication

YOU SHOULD NOT give to other parties any documents without clearance from yourFinance Officer and UIB.

YOU SHOULD NOT arrange, offer, promise or make any payment in respect of any event or mishap or loss, which may reasonably be foreseen to be likely to give, rise to a claim.

YOU SHOULD NOT incur defence costs you may wish to later claim back from Insurers without their written consent. Insurers may also wish to appoint specialist lawyers to handle the claim.

YOU SHOULD NOT incur mitigation loss costs without prior written approval of your Insurers


What to do in a Claim situation

Try your best to minimise injury or damage for which Amana is wholly or partially responsible i.e. as if no insurance cover is available.

Co-operate fully with any loss adjuster/claims handler appointed by UIB/the insurers.

Provide your Finance Officer/Manager of Internal Controls & UIB with all such further particulars, proof and information (e.g. retention of damaged goods for inspection/salvage; provision of witness statements/internal investigation reports; provision of relevant estimates/invoices and contract documents) with respect to the claim and circumstances under which the loss or damage occurred, and any other matter relating to the liability or the amount of the liability.

Forward every letter, claim, writ, summons (if any) to your Finance Officer/Manager of Internal Controls and UIB immediately on receipt of the same.


UIB Dubai LLC, No. 1901-2a, 014 Tower,

Business Bay, Dubai, U.A.E.Mailing Address: P.O. Box 8832, Dubai,

U.A.E.Tel: +971 (0)4 294 8666Fax: +971 (0)4 294 8388Mob: +971 (0)50 64 00 172

Email: [email protected] Website: www.uibgroup.com

t81_32_introduction+to+professional+indemnity+insurance.unlocked

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